Dudley Square retail rents rising as area undergoes revitalization

The new Ferdinand Building and other construction projects are expected to add 50,000 square feet of office and retail space in the Dudley Square area.

Author: Sandra LarsonWhile no one is sure what impact new office and retail space will have on Dudley Square, many think rents in the neighborhood shopping district will continue to rise.

The rising tide of new commercial development around Dudley Square is becoming ever more tangible, as the city began receiving proposals for leasing retail space in the new Dudley Municipal Center and financing was announced this month for a new and greatly expanded Tropical Foods store.

The Dudley Municipal Center, set to open in early 2015 on the Ferdinand’s site, will become the headquarters for the Boston Public Schools, bringing some 525 BPS employees and new restaurant and retail storefronts to the heart of Dudley Square. The new Tropical Foods building is the first phase of a project adding commercial and residential space to the long-vacant corner lot on Melnea Cass Boulevard at Washington Street. Across Melnea Cass Boulevard, a new hotel, residential and retail project is in the works for the vacant lot next to Ramsay Park.

These three projects alone promise some 50,000 square feet of new retail space. In addition, plans for Bartlett Place, approved in fall 2013, include 17,000 square feet of new office and retail space on the old Bartlett Yard. And the mammoth Tremont Crossing proposal, still under review by the Boston Redevelopment Authority, would add 550,000 square feet of retail along with residential, office and cultural facility space at Tremont and Whittier Streets in Lower Roxbury.

The surge of activity in Roxbury is sparking a mix of hopes and fears as area businesses and nonprofits contemplate what’s still unknown: the types of incoming businesses, the customer potential of an influx of BPS employees, and what will happen to area retail rents.

“You have to welcome the improvements,” said Sharif Abdal-Khallaq, whose family business, A Nubian Notion, has been in Dudley Square for 50 years. “The downside is that it might not be the community it was. Will the people here be participants, or will they be on the sidelines?”

Abdal-Khallaq has no doubt rents will go up. A Nubian Notion has already downsized to survive rent increases, he said, squeezing its inventory of Afro-Centric figurines, jewelry, greeting cards and general convenience store items into a smaller space.

“Any time you make an improvement in a neighborhood you can expect the rents to go up,” he said. “The rents have climbed, and they will continue to climb.”

Kalila Barnett, executive director of the nonprofit Alternatives for Community & Environment said her organization is seeking new office space in Dudley Square when their lease ends this spring after five years at 2181 Washington St.

“I would say rents are definitely rising,” Barnett said. “We want to lock in a long term lease. I’m concerned about whether ACE will be able to stay in Dudley over the next 10 or 15 years.”

The average retail lease rate in Dudley Square is currently $24 per square foot per year, according to Joyce Stanley, executive director of Dudley Square Main Streets. This translates to a monthly rent of $4,000 for a 2,000-square-foot shop. While Stanley said this rate is far lower than in some other Boston neighborhoods, it is up about 50 percent from 1995 rates of $16 to $18.

Rent trends and averages can be complicated to pinpoint, as rates vary widely between old rundown buildings, renovated buildings and brand new ones. In some cases nonprofits or desired “anchor” tenants were offered below-market rates long ago — and those rents sometimes jump dramatically up to market rate, Stanley said, potentially pushing a business out. Abdal-Khallaq noted that long leases may lock in base rent, but escalation clauses allow landlords to pass on to tenants increases in taxes, insurance or maintenance costs.

The Dudley Renaissance Center on Warren Street near the new municipal building currently has vacant retail space listed for $27 per square foot, and some say $30 rates are on the way for new space.

Officials have yet to announce rent figures for retail in the city-owned Dudley Municipal Center. In the Request for Proposal, potential tenants are asked to propose a rent they can pay, and potential bidders have been informed that a committee comprising city officials and Dudley community representatives will evaluate and rank potential tenant businesses on several factors, not just the highest bids.

The Dudley Municipal Building project team has said they hope to see local businesses in at least some of the spaces and that they are actively seeking a sit-down restaurant for the large space at the “nose” of the building with windows onto Warren and Washington Streets. At 7,800 square feet, the restaurant could have a capacity of up to 250 people. Five other spaces up for bids range from 1,800 square feet to 2,300 square feet, though subdividing into smaller units may be possible.

Rob Robledo is vice president of retail tenant services at CBRE/Grossman Retail Advisors, the firm hired by the city to publicize and market the Dudley Municipal Center’s retail space. His goal has been to get “as many eyes and ears as possible” on the Dudley Square opportunity, tapping a database of 7,000 local and national retailers.

Proposals are due Feb. 10, and Robledo expects a good response. He said a mix of local, regional and national businesses, ranging from “service to dry goods to restaurants,” have shown interest.

Not surprisingly, those in the retail leasing business express enthusiasm for the spate of development, though in interviews, they tend to downplay the rising rents and highlight the expected increases in street life and new customers.

“It should be a win-win situation,” said Russell Hill, a local commercial real estate broker and a co-owner of the Dudley Renaissance Center building. “Dudley in my memory has always wanted to not have its stores closing at 5 p.m. I think we’re going to see a more lively Dudley. A wider variety of services should be available, serving residents old and new and having better services and hours.”

Hill declined to say existing businesses would be pushed out by higher rents, but speculated that some would respond better than others to opportunities presented by a new set of customers and greater activity during the day and into the night.

“In a free economy, the market will dictate if the nature of a business will generate enough income to support higher rent,” Hill said. “If there’s more foot traffic, then existing businesses should benefit. If they remain competitive and maintain their businesses, they’ll benefit.”

Abdal-Khallaq agrees that business success in Dudley Square may depend on readiness to adapt to a changed neighborhood. “A Nubian Notion might be able to pay higher rent as time goes by,” he conceded, even as he wondered aloud how many employees from the new building would come to his store for milk or bread or ethnic products.

Barnett suggested that with so much new development, the Boston Resident Jobs Policy must be enforced so that construction dollars benefit local workers. And beyond construction jobs, she said, the development ideally will bring businesses that can provide a living wage for neighborhood residents and their families.

“I think this neighborhood deserves and needs more services and amenities,” she said. “But if we’re not able to figure out how to maintain the businesses and housing that support low-income folks, than this neighborhood is going to become like the South End.”

With rents likely to keep rising, Joyce Stanley is working to help existing businesses make improvements and remain competitive, conducting workshops from bookkeeping to social media. “[Local businesses] sometimes need to change direction, examine what they’re selling, do better marketing,” she said.

As for the overall impact of all the attention focused on Dudley Square, it’s a “mixed blessing,” Stanley said.

“We want new things to happen, we want a better mix of retail,” she said, “but those businesses that stuck it out all those years when nobody cared about Dudley Square — we want them to get something out of it, too.”